All Forum Posts by: Will Barnard

Speak to an attorney. Land trusts are only recognized in 4 states FL being one of them. As for protecting yourself from lawsuites, etc. get an insurance umbrella policy. You can get 1-2 million for very cheap. Much less than what the gurus charge for the trust prep docs and maintenance.

Also, trusts may have an effect on your taxes, speak to the tax attorney/cpa on this.
If you have only one or two properties and there is little equity in total, there is not much risk there so long as you do not act negligent in the management of your properties.

Good luck.

Josh,

The links to the blogs are great which explain the definition, calculation method, and reasoning for their use, however, they are general in nature.
Wendy did not provide figures in order to properly calculate this particular investment and I am quite worried about her even thinking of investing in such a large building if she has no idea about cap rates. That could be a financially fatal mistake.

In addition, the 50% rule that I keep seeing on this forum is for a quick scan evaluation of properties and not to be used to calculate true cap rates, dscr, operating expenses, NOI, ROI, or any other pertinent figures, particularly with a complex this size.

Wendy, my advice is to get some professional help evaluating this investment such as a very experienced investor, CPA, and/or RE attorney. There are many determining factors you need to calculate in order to arrive at the asking price's true cap rate and what cap rate it is currently worth.

Wendy, send the exact figures to me including taxes, insurance, management, utilities, administration/professioanl fees, makeready expense, trash, landscaping, and all other operating expenses and I will calculate the value for you as well as the asking cap rate, dscr, and price at which I would offer.

Hope this was helpful

Difficult, not unrealistic.
I have a duplex with $400 cash flow and 90% financed in Texas.
It is new so I will not have to worry about major maintenance/repair expenses for the first few years.

Your 50% OE (assumed). What is that based on?
The average OE for commercial multifamily units ranges between 40%-60%. A fourplex is not commercial and does not have the added expenses of an apartment complex.
Your operating expenses should be:
Taxes, Insurance, Property management, & repairs/maintenance
(Take into consideration the age of this unit, the older the higher the maintenance % should be)
The expenses should be calculated on the exact figures, not guess work or a proforma.
On a duplex-4plex, these expenses should not exceed 40%. If they do, I would look elswhere or figure a way to reduce the expenses.

Here is how I see the deal:
$2150 Gross Income
$2042 Adjusted GI (Less 5% for vacancy, adjust this % according to the area average)
$816 Operating Expenses (taxes, Ins, Prop Man., Repairs)
$1226 NOI
$838 Debt Service ($126,000 @ 7% PI)
$ 95 Mortgage Insurance (Loans in excess of 80% LTV)
$293 Monthly Cash Flow ($73 per door, which is below the $100 u want)
$ 95 Monthly tax deduction (assumes 28% tax bracket)
$ 81 Principle Reduction
Total Cash investment = $14000 + $4500 Escrow/Impounds = $19500
Total Return on Investment = 23% (Net Cash Flow + Prin. Red.)

I shoot for at least 25% TROI and $100 per door so I would do some negotiating before buying this deal.

Just to quote a few of my favorite lines on this subject:
The rich act in spite of fear while others allow fear to stop them.
Rich people do what others think about doing.
Adopt wealthy ways of thinking.
AND MY FAVORITE:
The greatest mistake in life you can make is to continuously be afraid you will make one!

That all said, everyone, including myself, is scared the first time. The only way to overcome the fear is to Just do it! Get eductaed first, do not buy RE blindly which WILL be a mistake. You can also get someone on your "team" who is veru experienced to assist you in this business. That is how I got started.

In today's market, I suggest the buy and hold strategy and acquire as much as you can without over-extending and always do your due diligence.

Good luck to all and happy investing!

Many of these posts suggested leaving the wife, hiding it from her, lying, or telling her to basically shut the f up. First of all, none of you are Tony Soprano, and secondly this business requires morals, ethics and integrity. The last thing we need in this business is to add more crap such as the unethical guru salespeople who prey on newbie investors.
If you can not communicate with your wife, perhaps the problem is with you. I suggest getting educated first before buying anything. Once educated (and during the process) you can coach your wife and intrigue her interest. Locate quotes, stories, and columns by the nations wealthiest individuals like Trump and Buffet. They are always encouraging RE as a viable investment and wealth building vehicle. There are also statistics that show that of the nation's wealthy, over 35% of their holdings are in RE.

In order to suceed in this business, you must be educated and must build a great team which includes your significant other.

Enough said.

I too put investments together for investors who live in areas where cash flow is nearly impossible, like in NY and CA. To get started, you simply need to look to other areas or even other states. Buying out of state is not as scary as it seems so long as you have the right team. Property management, insurance brokers, lenders, builders, etc are all necessary for your team. For less maintenance headaches (when considering out of state investments) look for newer properties or better yet, new construction as they come with one-two year builder warranties.
There are many great deals to be had in many states as real estate is on sale. Do not miss this wonderful opportunity to buy low, hold, and sell high years later. You will not regret it!

Best of luck to all!

Having a mortgage and property in your personal name and then quit claiming into an entity in which you are the owner, managing partner, etc. does not violate the due on sale clause. Any lender will see that the property did not change ownership, but simply the structure of ownership.
Consult with a competant RE attorney who will confirm exactly what I am saying. I do this all the time as do thousands of other investors.

The real question is, why do you want/need an entity? For liability protection - do not be negligent and you should be fine. Also as suggested from another response, get a large insurance umbrella policy. This is much more cost effective than paying for state franchise fees, the set up costs and the accounting of an LLC.

Let me make one final point here. I am not discouraging the structuring of entities to hold RE, simply pointing out options and the need to consult with a tax pro about each person's individual situation and future planning.

I have both LLC's and an S Corp, but I operate as a full time investor and have many different types of investments and necessary tax startegies for my situation.

Lenders will consider the rental income on investment properties in addition to your standard earned income. In today's lending market (much tighter and stringent than in previous years), you need 10% down. This can come from a variety of places. Cash, personal home equity line of credit (HELOC), 401k (ask me how), partner, loan from friends/family, private investor loan, and hard $ loans.

The more creative you are, the more deals you can do. Be careful not to over-extend which is the main reason why some investors fail (the other is a lack of due diligence). Always have at least 6 months of expenses per property in reserve. This does not have to be cash, but any type of readily available funds such as home equity, etc.

I have a great lender (direct) who can answer any of your questions if you are interested. I use him for all of my investments.

Read books (as mentioned by previous answers), get a RE investor as a mentor, know the financials inside and out, and start out small with a specific plan and strategy that fits within your goals, means, and skills.

In today's market, the buy and hold strategy is the best for long term wealth building as well as some cash flow now. It is a safe and reletively easy way to get started. Wholesaling, bird-dogging, and assigning contracts is also a great way to start with very little risk, little or no money, and no credit.

Good luck and start now, as you do not want to miss this RE cycle!
Many missed the last one and I believe this one we have entered will be even better. (A down market does not mean you can not generate great wealth and income)